UK Prime Minister Johnson confirmed that the planned easing of coronavirus restrictions would go ahead on April 12.
US employment data was notably stronger than expected and services-sector data was also strong.
The data boosted confidence in the US and global growth outlook. Treasuries, however, failed to respond to the strong data and 10-year yields edged lower. Wall Street equities posted record highs, although sentiment in Asia was less confident amid China credit reservations.
The US dollar dipped despite the strong data and retreated to 10-day lows. EUR/USD moved above 1.1800 despite reservations over the Euro-zone outlook. Sterling maintained a strong overall tone on recovery expectations with EUR/GBP just below 0.8500.
The weaker US dollar allowed a correction in commodity currencies with net gains. The Swedish krona lost ground amid a switch into other currencies.
US non-farm payrolls increased 916,000 for March, well above consensus expectations of a 650,000 increase, and the February increase was revised higher to 468,000 from the original figure of 379,000. There were solid gains across most sectors and a rebound in government jobs for the month.
Unemployment declined to a 12-month low of 6.0% from 6.2% previously and in line with market expectations. Most European markets were closed and there was a partial US holiday which curbed market reaction and the dollar gained only slight further support.
CFTC data recorded a decline in long, non-commercial Euro positions to a 12-month low, limiting the scope for further selling.
The US PMI services-sector index was revised to 60.4 for March from the flash release of 60.0 with the fastest increase in incoming business for over 5 years
The ISM services-sector index strengthened sharply to a record high of 63.7 for March from 55.3 previously and well above consensus forecasts of 58.3. There were also very strong increases in the rate of production and orders growth with both figures posting record monthly highs. Employment increased at a faster pace for the month while the rate of price increases also accelerated. The data maintained strong underlying confidence in the US outlook.
Overall confidence in the Euro-zone outlook remained fragile, especially with France entering a 4-week national lockdown, although expectations of a faster vaccination rate provided some relief. Despite Euro-zone concerns and notably strong US data, the dollar lost ground on Monday with a retreat to 10-day lows and EUR/USD moved above 1.1800. Trading volumes will recover on Tuesday and EUR/USD held just above 1.1800 as the dollar failed to secure renewed traction.
The dollar was unable to gain more than limited backing from Friday’s stronger than expected US employment report and USD/JPY was capped below the 111.00.
CFTC data recorded a further increase in short yen positions to the highest level for 2 years, limiting the scope for further yen selling and increasing the correction risk.
Treasury Secretary Yellen warned against any premature tightening of global fiscal policy and there were strong expectations of further US support with the Senate again ruling that reconciliation can be used to approve legislation. Wall Street equities remained strong with the S&P 500 index posting fresh record highs which provided an element of US dollar support. US yields, however, again failed to gain any sustained traction despite the stronger than expected data releases. Overall, USD/JPY dipped sharply to test the 110.00 level amid a wider retreat before a correction.
China’s Caixin PMI services index strengthened to 54.3 for March from 51.5 previously with net gains for employment. There were, however, also reports that China had asked banks to reduce credit supply which dampened expectations surrounding the outlook and risk appetite was slightly more cautious.
US yields edged lower on Tuesday and S&P 500 equity futures also posted slight losses which limited yen selling and USD/JPY settled around 110.20.
Sterling was held in narrow ranges ahead of the holiday weekend with little in the way of fresh incentives and London markets closed on Friday. There was GBP/USD support close to 1.3800 against the US dollar. CFTC data registered a net increase in long Sterling positions for the first time in four weeks which indicated slid sentiment.
UK Prime Minister Johnson confirmed that the planned easing of coronavirus restrictions would go ahead on April 12, including the re-opening of non-essential retail. Underlying confidence in the UK recovery continued to provide net Sterling support. Chancellor Sunak also announced a new government-backed loan scheme to help companies recover.
The UK currency also gained net support from the advance in global equities with FTSE 100 futures posting solid gains. There were GBP/USD gains to just above 1.3900 while GBP/EUR continued to test the key 1.1800 resistance area, although volumes remain low. GBP/USD traded just above 1.3900 on Tuesday with GBP/EUR just below the 1.1800 level and continuing to test resistance levels as UK markets re-opened.
|09:30||Euro-Zone Sentix Investor Confidence(APR)||6.7||5|
|10:00||Euro-Zone Unemployment Rate(FEB)||8.10%|
|14:00||USD JOLTs Job Openings(FEB)||6.917M|